Focus on the Most Important Market Information

One of the first things I tell new Online Trading Academy students when they ask for advice is to really focus on what’s important and don’t spend too much time on anything else. What I am suggesting is that they (you) pay attention to the reality of what the price action is really telling them. Being aware of the simple messages price sends is what most people ignore but is one of the most important pieces of market information for desirable outcomes and achievements when it comes to trading and investing results.

If you think what I am suggesting is a waste of time and just another article on trading psychology, think again. Think of one or two of the biggest mistakes you have made in your life. It could be in trading, a failed relationship, a bad choice that cost you your job, losing part of your nest egg to a bad investment, and so on. I bet the ultimate reason you made this mistake is because you were not paying attention to a reality that was right in front of your eyes. Do you look back on that mistake these days and say, “How could I have done that?” “How did I not see that coming?” It all seems so obvious after the fact. It all comes down to simply paying attention to the reality of what is happening.

We talk about this in our classes and online live trading sessions. We focus more than anything else on paying attention to the reality of what the PRICE ACTION is telling us, not thinking too deep but, more importantly, paying close attention to the simple supply and demand information the market is always conveying to us. What is important for you to understand is that this important market information is only given to those who really listen.

OTA Supply Demand Grid, Ten Yr Note Futures Dec 27th 2016

The two lines on the chart above are drawn around an area of trading which we call demand. During that period of trading, price hardly traded in that area. Then, all of a sudden, price rallied from that level in strong fashion, as you can see above. What the market was telling those who were willing to listen at that time was simply that demand greatly exceeded supply at the origin of that rally in price, which is why price spent so little time at that level. This is where the bank/institution buy orders were, the smart money was willing to buy there. We call this a “demand zone” or “buy zone”. This set up a quality trading opportunity in the near future, for those who were paying attention.

After the big rally from that level, price started moving back to that demand level. Price eventually declined to that level where we had our predetermined demand zone. This is where we look to buy. What makes this a high probability buying opportunity is best understood when you focus on who is on the other side of your trade, the seller in this case. The sellers who sold when price revisited our demand zone were making two key mistakes. First, they sold after a decline in price and second, they sold at a price level where demand exceeded supply. The chart had already given us that market information. These two actions tell us that these are novice traders who take action when the odds are stacked against them. By taking the other side of that low odds trade, we are taking the high odds trade. The 10 Yr Note Futures went on to reach the target for our members who took the trade.

Being able to consistently identify turning points in markets is the key to low risk and high reward market speculation. This begins with being able to objectively quantify demand and supply in any market. To get to that point, you must be able to do something most people can’t, and that is paying attention to the reality of how proper trading and investing really works. Instead of reading all the trading books and learning to buy and sell in markets when everyone else buys and sells which offers no edge, pay attention to the reality of what is happening in front of your eyes. Most traders try and analyze so much market information that they end up with a very complex strategy that clouds the simple realities of price movement, and that is a mistake.

Disclaimer

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results.
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